African Development Bank approves R5bn Covid-19 loan to SA

The African Development Bank (AfDB) has approved a R5 billion loan to South Africa which also represents its first budget support allocation to the country, it said on Wednesday. 

The AfDB said the loan, which translates to $288 billion, forms part of its $10 billion Covid-19 Response Facility and will fund the country’s response programme to the virus. 

“South Africa’s ability to respond to the pandemic has implications for neighbouring countries as well as the continent as a whole, given its position as Africa’s second-largest economy after Nigeria,” it said in a statement.

The loan will go towards efforts to: 

• Protect lives and promote access to essential equipment to prevent infection, such as personal protective equipment, sanitisers and gloves;
• Protect livelihoods by preserving jobs, incomes, food security and access to essential public services; and
• Protect firms by supporting enterprises in the formal and informal economy to withstand the impacts of Covid-19 and prepare for economic recovery.

The loan from the AfDB comes after the New Development Bank, otherwise known as the Brics Bank, approved a $1 billion Emergency Assistance Programme Loan to the country that is also meant to assist the government in funding the efforts to stem the spread of the virus and mitigate against its social and economic impact.

Constraints

The AfDB acknowledged that even prior to the Covid-19 pandemic South Africa’s economy was already in dire straits, noting that the economy is expected to shrink by 7.2% which is the largest contraction in 90 years. 

“These growth forecasts have placed budgetary constraints on the government’s ability to deal with the health crisis,” it said.

“South Africa is ranked as the most prepared African country to deal with a pandemic, according to a Global Health Security index. 

“Yet significant challenges remain in the public health sector, including underfunding and human resource shortages. While the private health sector is better equipped, it remains unaffordable to the majority of South Africans.”